Q71 Greg Clark: Six months from now or six months from January?
Mr Taylor: Six months from now we shall have completed that.
Q72 Greg Clark: So the end of the year. It has taken a year in other words to conduct these reviews. This is significant Chairman because we have been discussing here the impact of delays to these PFI projects and the NAO Report is very clear as to the cost of this. What is the total value of the projects under review? Just remind us.
Mr Taylor: It is between £7 to £9 billion, from £13 billion.
Q73 Greg Clark: So £13 billion and it will be a year to conduct these reviews. According to the Report, a five-year delay has resulted in these projects costing 37% more because of the high rate of construction inflation, which is about 7% a year above inflation. So we are talking about this costing something like £2 billion more as a result of you deciding to have these reviews. Is that good value for money? What would £2 billion buy in a hospital? Would that be equivalent to a new hospital?
Mr Taylor: I am not quite sure how you have calculated that?
Q74 Greg Clark: Well let me explain. A five-year delay was 37% more in terms of construction inflation, which is about 7% a year. If you have a building programme of £13 billion then about 7% of that, if you assume that the inflation has been 7% a year, is something like £2 billion, is it not; £2 billion has evaporated because you have had this year's review?
Mr Taylor: We are certainly not expecting in effect to lose the sort of money that you are talking about.
Q75 Greg Clark: You are not expecting to, but every month that goes by costs money. Time is money in this, as we know. This is the point of this hearing, the point of this Report and yet in answer to my question as to how long these reviews are going to take, we discover that it is going to be a year from January. A year has gone, £2 billion has evaporated and that seems to be a hospital to me. We have lost a hospital because you have taken a year.
Mr Taylor: May I just illustrate what we have been doing? It is a fair question and I probably ought to offer a proper note to the Committee setting out the process for doing this.2 If we just take one example, St Helen's and Knowsley, which we subjected to this review process, as a result of that we have agreed, and these are schemes which are close to financial close so those are the ones we have prioritised, to reduce the unitary charge by £8.5 million as a result of the scrutiny. We made similar sorts of changes in the Birmingham scheme which just went forward where we agreed to put on hold 100 additional beds. Already the process of scrutiny is proving its value and we have done six of the schemes closest to financial closure. We are now moving on to eight other schemes where we have already engaged contractors and then we shall move to the other schemes.
Greg Clark: I am keen that you get on with them, but should have said perhaps before I touched on these questions that there is a PFI scheme in my constituency that may be one of the eight. Perhaps I should put that on the record as well.
Q76 Mr Khan: Mr Nettel, do you accept that the outline business case in 2000 was inadequate?
Mr Nettel: Yes.
Q77 Mr Khan: What expert advice did you receive when that was prepared?
Mr Nettel: It was prepared by the West London Partnership Forum under the auspices of that group of organisations as set out in the Report.
Q78 Mr Khan: What expert advice did you receive?
Mr Nettel: We used, in large part, a group of consultants who worked out the option appraisal exercise and took advice from the trusts on what was required.
Q79 Mr Khan: How many previous schemes had those consultants worked on?
Mr Nettel: I am afraid I simply do not know that, I shall have to give a note on that.3
Q80 Mr Khan: Have you taken legal advice as to whether you have any redress against them?
Mr Nettel: No, we have not.
_____________________________________________________________
2 Ev 22-23